The hype over artificial intelligence has resulted in a positive performance in the U.S. stock market this year, says a Societe Generale analyst.
“The AI boom and hype is strong,” London-based Manish Kabra, a strategist at the financial services company, said in a note on Friday, according to Bloomberg. “So strong that without the AI-popular stocks, S&P 500 would be down 2 percent this year.” The S&P 500 is up by 7.84 percent year-to-date as of May 12. Stocks of major tech firms involved in AI technologies have rallied this year.
Shares of Alphabet Inc, which owns Google, are up by over 31 percent year-to-date. Microsoft is up by close to 29 percent, while Nvidia has surged by nearly 98 percent.
AI has been a hot talking point among companies in the first quarter. According to a Reuters report, more than a fifth of S&P 500 firms that reported their Q1 earnings by April 26 had mentioned “artificial intelligence” or “AI” at least once in their analyst conference calls.
This is the biggest proportion since Q3, 2021. During its first quarter call, Google used the term “AI” 52 times, while Microsoft mentioned it 20 times.
AI Companies
In addition to Microsoft, Nvidia, and Alphabet, other major AI players include Amazon, cloud computing firm Snowflake, Adobe, Apple, Salesforce, and Meta, which owns Facebook.
At present, the focus of big players is largely to use AI to boost their operations and offerings. For instance, both Google and Microsoft are integrating AI technologies in their search engines.
Microsoft has a long-term partnership with OpenAI, the entity behind the AI chatbot ChatGPT which has taken the world by storm. The tech giant announced a $10 billion investment in OpenAI after ChatGPT was released. Alphabet has its chatbot called Bard.
Chip manufacturer Nvidia’s GPU chips are crucial for machine learning programs, allowing it to dominate the AI sector.
Apple has been buying multiple private AI firms in the past year, which could boost the company’s products like facial recognition, Siri, and augmented reality. Adobe has integrated AI to offer its “Sensei” service, which is a platform aimed at helping users with projects like design and marketing.
Amazon is incorporating AI components into Amazon Web Services, using it for automated data analyses and developing chatbots to aid clients. Salesforce’s AI platform, Salesforce Einstein, provides features like predictive search that help users to personalize product results for their consumers.
AI Stock Bubble
The massive interest in AI stocks from investors has also raised concerns about a potential bubble in this niche. Certain small firms have seen their stock values surge after entering the limelight this year.
In an April 24 interview with Nerdwallet, Haydar Haba, the founder of Andra Capital, a venture capital firm that invests in AI companies, said that some investors may be overenthusiastic about betting on the sector at present.
He pointed out that artificial intelligence has been used as a buzzword to push up stock premiums. However, many of these companies have not demonstrated the “usage of cutting-edge techniques.”
“In the private markets, we are seeing hundreds of millions of dollars flow into ‘AI’ companies that have no product market fit. While investors are justifying such investments based on growth potential, it remains unclear whether that potential can or will ever be monetized,” Haba said.
